Bitcoin Would Survive Recession, But Ethereum Might Crater: Tech VC

Bitcoin would survive a recession, while Ethereum would suffer and Ripple’s XRP would remain unaffected. That’s the prediction of Kyle Chapman, a partner with tech venture capital firm Cosimo Ventures.

Chapman wrote in Barron’s that a recession would not hurt bitcoin because it’s decentralized and is mostly independent of the stock market’s cyclical undulations.

Fed Chair: Relax, No Recession In 2019

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“The outlook for our economy is a favorable one,” Powell told 60 Minutes on March 10. “It’s a positive one.”

“I think growth this year will be slower than last year. Last year was the highest growth that we’ve experienced since the financial crisis, really in more than 10 years. This year, I expect that growth will continue to be positive and continue to be at a healthy rate.”

Chapman: Bitcoin May Become a Safe Haven Like Gold

As for the cryptocurrency market, Cosimo Ventures’ Kyle Chapman says bitcoin would probably become a safe-haven asset, and its price would spike during an economic downturn.

“Faced with a recession, Bitcoin may serve a market function similar to that of a safe-haven commodity, rather than an equity, due to its inherent scarcity and decentrality.

“Bitcoin, by design, is not intended to be used as a foundation on which developers could build a platform or enterprise.

“Because its supply is not controlled by any one person or entity, it’s more likely that Bitcoin will perform independently of broad market pressures (akin to how one would expect gold to react) — potentially even appreciating in value should demand for alternative forms of dependable value storage arise.”

Ethereum Follows Stock Market Trends

Chapman speculated that ethereum would succumb to stock market trends during a recession. | Source: Shutterstock

In contrast, Chapman expects Ethereum to underperform during a recession because it’s more closely entangled with the equity markets than other cryptocurrencies. Accordingly, Ethereum’s trajectory generally follows broader stock-market trends.

“Because Ethereum is a developer-focused blockchain, it’s very much dependent on how many companies use the Ethereum platform to build their projects. If those companies were to go out of business, Ethereum’s relevance and, subsequently, its price, would undoubtedly be affected.”

As for Ripple’s XRP, Kyle Chapman believes it would remain largely unaffected by a recession because it functions more as a medium of exchange that operates independently of the stock market.

“Because XRP functions outside the purview of mainstream markets, it’s certainly reasonable to believe that XRP would act independently in the event of a recession.”

“On the other hand, however, XRP’s price is also highly dependent on issuance and adoption. If Ripple loses usership — either because its issuance was mismanaged or because other projects (such as J.P. Morgan’s JPM Coin) became more popular — XRP’s value would almost surely go with it.”

About The Author

Samantha Chang is a financial editor who writes about politics at BizPac Review and about business at CCN. She is a law school graduate and an alum of the University of Pennsylvania who enjoys finance, flowers, and fitness. You can follow her on Twitter at Samantha_Chang.